Colorado business index slumps, but still forecasts growth

Ernie Goss

A monthly index tracking business conditions in Colorado has slipped, but continues to signal growth based on increased construction activity as well as hiring at a pace double that of the United States.

The Business Conditions Index retreated more than four points in September, yet at 52.2 forecasts an expanding economy over the next three to six months.

“Construction activity — commercial, residential and industrial — continues to be an important driver of overall state growth, even with higher long-term interest rates,” said Ernie Goss,  director of the Goss Institute for Economic Research in Denver.

Goss calculates the Business Conditions Index for Colorado, Utah and Wyoming based on the results of monthly surveys of supply managers in the three mountain states. Readings range from 0 to 100. Readings above 50 indicate expanding conditions.

In Colorado, the overall reading reflected lower component readings for new orders at 50 and production or sales at 44.1. The reading for employment rose more than a point to 54.4.

“The state is adding jobs at an annual pace exceeding 2 percent, or more than double the pace of the nation,” Goss said. “Nondurable goods producers are adding jobs even as durable goods manufacturers reduce jobs.”

The Business Conditions Index for the mountain states declined nearly three points to 51 in September — signalling growth, but at a slower pace.

“Even though growth will continue for the remainder of 2013, it will be at a slower pace,”  Goss said. “Mining firms and companies supporting this sector are experiencing pullbacks in economic activity. On the other hand, construction activity, especially in Colorado, continues to trend higher and add to overall regional growth.”

The overall reading for the mountain states reflected lower component readings for new orders at 47.6 and production or sales at 45.9. The reading for employment sank nearly six points to 48.3.

“Manufacturers linked to agriculture and energy are growing at a slower pace than this time last year. On the other hand, companies tied to construction are experiencing healthy growth. Food processing firms also are expanding at a solid pace,” Goss said.

While nearly 74 percent of the supply managers responding to the surveys upon which the September index was based said provisions of the Affordable Care Act had yet to affect hiring or staffing, slightly more than 26 percent said federal health care legislation had reduced hiring or hours worked or resulted in layoffs.

A component of the index tracking confidence among supply managers in the three states tumbled more than seven points to 42.2. “Uncertainty surrounding implementation of health care reform and the congressional-presidential budget impasse pushed supply managers’ economic outlook lower for the month,” Goss said.

Meanwhile, though, another component of the index tracking inventories of raw materials and supplies climbed back above growth-neutral 50 to 52.3, suggesting supply managers expect increased production and sales in the months ahead.

The reading for prices paid, a measure of wholesale inflation, advanced more than two points to 61.5. “The last two months, we have recorded fairly sizable jumps in our inflation gauge. Given that the Federal Reserve continues (its) $85 billion monthly bond buying stimulus program, the risk of elevated inflation is climbing, but still remains well below levels that should cause concern,” Goss said.

In Utah, the Business Conditions Index edged up three-tenths of a point to 52.2 despite lower component readings for new orders at 46.1, production or sales at 46.8 and employment at 48.5.

In Wyoming, the Business Conditions Index also edged up three-tenths of a point to 54.8 on higher component readings for new orders at 66.3 and production or sales at 63.9. The reading for employment dropped nearly nine points, however, to 46.7.